3 Δεκεμβρίου 2013

On experts, politicians, collusion and party politics

Posted by Lenos Trigeorgis* on December 2nd, 2013

Cyprus suffers (seriously) from this strange phenomenon: anyone with good public relations(PR) skills, desire to self-promote and/or exploit networking relationships can get ahead, appear as an “expert” or get appointed or voted in a position of authority and power — be it a Minister in the government, on the Board of a commercial or the Central Bank, even President of the Republic or head of the Church. 

Yet the Minister of Energy understands little about natural resource valuation or development strategy, the Minister of Foreign Affairs (a doctor)understands less about geopolitics or strategy for handling our national political problem (both get appointed by the Council of Ministers to lead the national committee on Hydrocarbons and Geopolitics), an expert on economics (appointed on the National Economy Council or as advisor to the committee for investigating the failure of the Cypriot economy) understands little about the deeper workings and interactions of the economy, and the leader of the Church (rising to power in a manner analogous to canning politicians) is more an expert in banking and economics than spirituality.

In this and future articles I will argue that in many cases the best decision on national issues (about the economy, privatization, energy/gas development, political solution to the Cyprus problem) is the exact opposite of what such experts, our politiciansand political parties or accepted common wisdom suggest. I will argue, for example, that the value of undeveloped gas reserves is worth more, not less, the greater the uncertainties, and that we hurt ourselves by ignoring this potential value. That we ourselves destroy this value by not understanding that strategy should be contingent on future scenarios and that a rigid fixation on our (desired) plans (in the energy field, privatization policy or the national political problem) is wrong and indeed dangerous. That the best suggested solution for us for solving the Cyprus problem is exactly the opposite of what the ignorant Cypriot politicians repeat as mantra, brainwashing the Cypriot people for four decades. That the above issues are all interrelated and interacting (unlike naïve statements made by the Foreign minister that appeal more to elementary school students). That proposed measures on the economy are superficial and indeed in many cases economically silly. And that the biggest enemy of Cyprus is not from the outside (Troika) but from within (our corrupt system of clientele relationships, party politicization and desire to control everything that violates principles of meritocracy and incentives for development every day, inconsistency between the words and actions of our political leaders and public officials). In short, a strategy of doing the opposite of what our political leaders have been suggesting over the years would likely fare much better than the current (and pending future) catastrophes these policies brought.

Despite recent positive assessment by the troika representatives, things in the economy will likely get worse before any realistic hope for real improvement, as those whose unemployment benefits expire after 6 months will join the growing ranks of unemployed, contracting further consumer demand. With insufficient operating capital due to money restrictions from the banks, more businesses will find it increasingly difficult to stay afloat. Non-performing bank loans will rise further rather than decline. Political unwillingness to deal with the issue of Non-performing loans (NPLs) properly (despite pressure by the Troika) does not help either. With little exports and a self-feeding cycle of economic contraction, worse is likely to come. Announcing superficial “economic” measures like the building of casinos will not save tourism or the economy.

Our society and successive governments have been corrupt and indifferent, indifferent either deliberately, out of incompetence or just because public officials don’t have the right incentives and don’t care. The previous government was incompetent in both rhetoric and behaviour. The current government gets the right rhetoric much of the time but does exactly the opposite. Some academics or “experts” have been appointed by this government in advisory positions but their role seems rather decorative, more of a public relations gimmick by the government than a true think tank. Proclaimed government policies on the economy remain superficial and ineffective to bring true growth and development, focused on silly ideas like casinos, golf courses and the like. In terms of action both recent governments have been incompetent and corrupt.

Corruption and incompetence are systemic to our society and political system. Our political parties are the very source of incompetence, clientelism and corruption. They have bankrupt the country, and now we have hope that they might get us out of this mess? India put us on a black list with double tax treaties because our tax officials don’t reply to information requests. So what is this empty rhetoric about administrative metarrithmisi (reform)? The Minister of Economics has meetings with DIKO party leadership and union bosses talking about “flexibility” with privatization. All the political parties remain opposed to privatization, despite it being a key obligation in the memorandum with troika and already agreed to and voted by parliament. Only the Archbishop, to his credit on this occasion, differentiatedhimself recentlyin favor of privatization, recognizing that the semi-governmental organizations (like the telephone and electricity authorities) have become ampeloxorafa(fiefdoms) for exploitation by the political parties. A realization which might explain why all the political parties still try to “save” this corrupt system against the pressure of privatization and their explicit legal obligation through parliamentary approval of relevant troika provisions in the memorandum. What does it take to understand that it is inappropriate (legally or morally) to have a state-owned enterprise whose directors are appointed by a party-elected government to give money to a political party? Privatization will proceed nonetheless because the troika will require it. It is not just about raising money (Euro 1.4 Billion). But it would have been best if our government and politicians could truly see the long-term benefits of privatization for the economy, administration and Cypriot consumer and society rather than having to be drugged into it. The political parties think they can still collude, procrastinate and avoid. They are mistaken as they will find out the hard way!

The same hypocricy and superficiality prevails at the political front with regard to the national political problem. When Clerides promoted the concept of bizonal, bicommunal federation decades ago under different circumstances (when Cyprus was threatened by Turkey and the ruthless passage of time in cementing division while Cyprus was weak being outside the EU and without yet known gas discoveries) they all called him traitor. Now that conditions changed again, every “patriot” is repeating as mantra this solution concept as our ideal objective, only if the Turks agree to it upfront in a joint communique. It is actually another recipe for sure disaster. Whoever dares go against the current of the times, as Clerides did then, to point out the naked, intuitive new reality, will be (once again) called a traitor. It seems ex post that the only true politician and statesman who anticipated the future consequences of this or that action orinaction, against the prevailing political thought at the time, was Clerides. The rest of Cypriot politicians have been inconsequential, thinkless mediocrities. With their loud, pompous and dytherambic speeches, driven by populism and internal public consumption rather that true vision of the future, our nationalist, extremist, idealist politicians lead the country first to internal polarization and then to disaster. In this category belong most Cypriot leaders, including Grivas, Makarios, Kyprianou, Lissarides, Papadopoulos, Christofias, and most current ones, including Anastasiades, Karogian, Omirou etc. You can even spot these pseudo politicians from their tone of voice and theatrical style of talking from miles away. The only shouting exception was Clerides, modest, low tone, listening, balancing, thinking ahead, dearing to challenge and be different. The rest have been mediocre parrots, repeating certain mantras thinklessly. None of the present politicians can be called Clerides´ political children, they are more like political dwarfs. There is no resemblance in political ethos, honesty, modesty, courage, devotion to democratic principles, realism, self conciousness as a person or leader.

The only true policy in the spirit of Clerides is to go against the prevailing current pointing out that the very policy he promoted when Cyprus was under Turkish threat being outside the EU (and without known gas reserves), that of bizonal bicommunal federation, is in fact contrary to basic EU principles and values as well as basic UN human rights and democratic principles and is, therefore, a recipe for sure future political and economic disaster. To be true to Clerides one must oppose the very same policy he initiated previously under different circumstances, that now all political parties, all patriots and all parrots repeat as a dream solution goal mindlessly. The world around us has changed dramatically but our politicians got fixated to pompous rhetoric and misconceived static “strategies” they had developed and perfected in words decades ago. The political establishment cannot think originally in the new world but lives and mindlessly repeats tragic mistakes from the past in new forms over and over again, whether it is in the area of privatization, energy policy or the national political problem. The political establishment isin fact bankrupt and with the fixation of a political compass whose needle got stuck south, blindly leads the country from disaster to disaster in all spheres of social life, state administration, energy policy, economic affairs, and the national political problem. The only thing Clerides did not anticipate correctly, was that his support for pluralistic democracy in the form of more political parties (to counter the monocratic dominance of Makarios in the 1960´s) would be mishandled by the very same political parties to, in effect, bring about the opposite result from what was intended by this deeply democratic visionary: result in lack of meritocracy, in blind party obedience and being yes men to have any chance to climb through party ranks, foster clientelism like religion, entrench collusive relationships with all every other form of power in society, encourage lack of professionalism, of deep thinking, serious analysis or any strategy planning, promote a static view of the world, deliberate polarization tactics, short-termism, populist rhetoric and short-term voter chasing. All this lead to the destruction of the country, from inviting in the Turkish invasion in 1974, to the recent bankruptcy of the state and subsequent economic collapse. Unfortunately, we have not seen bottom. The same static, ill-conceived politicized policies of the bankrupt political establishment will almost surely waste our only hope, our national energy wealth, and will lead to another political disaster, that of a bizonal, bicommunal (con)federation, an oddity and contradiction within the European Union as it directly violates some of its key principles and values. The dream solution repeated as mantra by our political establishment and all political parties with no exception is in fact an anachronism based on national origin and quotas, not equal human citizen rights, limiting fundamental freedoms within parts of the EU. It is a time bomb waiting to explode in the hands of amateurish short-sided Cypriot politicians with a proven record of cheap demagoguery, deliberate polarization, collusive tactics and self-destructive tendencies.

*Lenos Trigeorgis holds a PhD (DBA) from Harvard University and is the Bank of Cyprus Chair Professor of Finance at the University of Cyprus and President of the Real Options Group. He has been a Visiting Professor of Finance at the London Business School. He is the author of Real Options (MIT Press, 1996), Strategic Investment(Princeton University Press, 2004) and Competitive Strategy (MIT Press, 2011).


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